With the web.config file configured as documented, I am unable to access the dashboard for any sub-sites, and no styling loads for the sub-sites either (presumably it cna't find it's CSS and other associated files).

I've had this working without issues previously (last year), so I dug up an older web.config file. There were two differences. The first was that the newer file does not have a line referencing ms-files.php (I'm guessing it's been obsoleted), and the second change was that this rule used to say {R:2} (which works), while it now says {R:1}.

WordPress provides the code for the web.config file in the Settings > Network Setup Page.

Ok, looking closer, [22042] changed the rule from ^[_0-9a-zA-Z-]+/(wp-(content|admin|includes).*) to ^([_0-9a-zA-Z-]+/)?(wp-(content|admin|includes).*), so the change from R:1 to R:2 seems correct here.

These rule suggestions are all screwy. Let's take the time to get it right. I have a feeling the proposed changes will just break something else.

Agreed, I will install two WP IIS multisite, one domain and one sub-directory.

I haven't played with WP's PHPUnit testing (yet) though setting up these sites with the full ​http://develop.svn.wordpress.org/trunk/ repo with shell access (and WP-CLI if needed) shouldn't be an issue along with a few admin accounts for testing.